Numerous worried voices are being raised in Europe over the loss of competitiveness of Old Continent companies against American ones due to the lower energy costs guaranteed overseas by shale gas. This chorus of voices was recently joined by the BDI, the European lobby of German industry, which has just published a report denouncing how the higher cost of energy will weaken the competitiveness of European industry vis-a- vis of American competitors. This is a widespread concern among German companies, which in any case certainly do not pay for electricity like the Italian ones. For example, Volkswagen itself recently announced that it had stopped buying some components of its cars from domestic suppliers, preferring foreign companies and motivating the choice with high energy costs. A concern recently shared in the Financial Times by other leading companies such as BASF and Bayer.
The truth is that we are facing a technological revolution. The fracking technology for the extraction of shale gas (and the much less known to the general public shale oil) are violently reshuffling many of the cards so far on the table. In fact, although the ecological impact of this technology is the subject of heated discussions both in the States and in numerous European countries (some of which have even imposed moratoriums on exploration activities), its effects in other fields are starting to become evident.
First, as previously discussed in this paper, the price differential between natural gas in the US and Europe is leading to what many are calling a renaissance of US industry, especially in metalworking and petrochemicals. A trend that seems to justify the concerns expressed by the BDI and which is clamoring for a forward-looking European energy policy.
Secondly, a recent IEA report reveals how the decline in American demand for coal is generating an increase in European imports of this highly polluting fuel due (once again) to high gas prices and low CO2 prices. This trend, even if destined to reach its peak in 2017 and then start to decrease, nevertheless underlines how European environmental policies are also placed under stress by the shale gas revolution.
All this poses great challenges to Europe, to its energy, environmental and industrial policies which appear to be connected as never before. For example, the diversification of sources is not only a tool to increase energy security but also to increase competition on the market and reduce costs for businesses. The recent Final Investment Decision (FID) for the South Stream project, strongly backed by Gazprom, surely is a blow to the wishes of diversifying European gas supplies through the fields of the Caspian Sea. Even if the last word has not been said for Nabucco, the project sponsored by the European Union and antagonist to South Stream, it is strongly questioned. From this point of view, in order to avoid an even greater diffusion of coal in Europe, it becomes essential to be able to import American LNG through new liquefaction plants and the construction of an integrated European gas market.
From this point of view, another interesting card can be represented by the futuristic Desertec project which aims to exploit the potential of solar energy in North Africa as a clean energy source for Europe through a Morocco – Spain power line. If Desertec's promises can be kept, it could become an important tool not only for increasing energy security but also for reducing the environmental impact of European industry. Spain's inaction to approve the project during the November conference and the recent announcement of Siemens' decision to sell all its investments in the renewable sector, including Desertec, unfortunately do not bode well for this project.
However, the growing use of coal in Europe is not only a symptom of its price differential with other sources but also a sign that perhaps some of Europe's ambitions to lead a new green economy are not progressing at the right pace. The need to rethink European environmental policies is evident, even without necessarily having to go to the extreme measures suggested by Prof. D. Helm in his recent book "Carbon Crunch" where he argues for the need to introduce a carbon tax on manufactured and imported goods, a move which, if not concerted worldwide, would certainly lead to commercial retaliation.
In short, the environment, energy and economic growth appear increasingly interconnected and it seems increasingly important to aim for green growth, i.e. a vision capable of producing integrated development and environmental policies.
